Rookie Pay in the NFL - Is Jake Long Overpaid?

"There's something wrong about the system," Goodell said Friday. "The money should go to people who perform."

Goodell
referred to Michigan tackle Jake Long's five-year, $57.75 million
contract - with $30 million guaranteed. Long was the first overall
draft pick by the Miami Dolphins in April.

"He
doesn't have to play a down in the NFL and he already has his money,"
Goodell said during a question-and-answer period at the end of a
weeklong sports symposium at the Chautauqua Institution. "Now, with the
economics where they are, the consequences if you don't evaluate that
player, you can lose a significant amount of money.

This is probably just one in what will be a long line of public statements made by both sides of the collective bargaining process in the NFL, statements crafted to get the public on one's side. Still, is Goodell on the money with his comments or not?

On the face of it, Goodell seemingly implies that player's should receive their pay
after their play has been observed. I doubt that's what he's saying here, but that what he's saying, taken at face value.

More to the point, according to basic economic theory, if an employer only values profits, the value of an employee is what he contributes to the the firm's revenue. In the NFL, since each player's contract is signed before the player's productivity is known, his expected contribution is key in determining whether he is overpaid.

Long was an effective left tackle in his last two years at Michigan (he apparently is skillful at holding and not getting caught). The left tackle is any team's most important insurance policy since he protects the right-handed quarterback's blind side. Because of this insurance value, left tackles are one of the most
valuable, and hence highly-paid, players on the football field*.

Based upon the salary numbers given, the Dolphins feel that Long will be worth about $57.75 million in present value over 5 years and they are willing to guarantee $30 million, or $6 million per year. I take this as his expected contribution. Doing the math, this tells us that there is about a 51.9% chance that he will reach that level of productivity and a 48.1% chance that he'll generate nothing.

If the Dolphins did overpay, there are two places where they made mistakes: they either overestimated his future value or they overestimated the probability that he would reach his future value. Is there any reason to believe that the Dolphins made at least one of those mistakes?

For example, the top two paid NFL players in the league last year were
quarterbacks: the Falcons' Michael Vick and the Seahawks' Matt
Hasselbeck received $23.1 million and $19 million respectively. But the
next two highest-paid players were left tackles: the Rams' Orlando
Pace, at $18 million, and the Seahawks' Walter Jones, at $17.7 million.

By the 2004 N.F.L. season, the average N.F.L. left tackle’s salary was
$5.5 million a year, and the left tackle had become the
second-highest-paid position on the team, after the quarterback. In
Super Bowl XL, played on Feb. 5, 2006, the highest-paid player on the
field was the Seattle Seahawks’
quarterback, Matt Hasselbeck — who was just finishing the first season
of a new six-year deal worth $8.2 million a year. The
second-highest-paid player on the field was the man who protected
Hasselbeck’s blind side, the left tackle Walter Jones, who made $7.5
million a year.

I'm not sure what explains the $10.2 million nominal jump for Jones between '04 and '05, but why is a guaranteed $6 million in present value over 5 years, starting in 2008, overpaying compared to these numbers? In fact, a guaranteed $6 million per is awfully close to the average left tackle salary from 4 years ago.

If the Dolphins are willing and able to risk $30 million on Long, my belief is that they should be allowed to do so. More generally, players should be allowed to be paid what they and their teams think they are worth regardless of seniority stature. Bargaining for contract language that forces anything less is just rent-seeking on the part of teams, and if the players' union agrees to it, I hope they get something of value in return.

Comments

You can follow this conversation by subscribing to the comment feed for this post.

What reasonable economic argument can Goodell and owners really proffer here? If it is so inefficient to put resources towards these unproven rookies, can't any team gain a competitive advantage by simply not signing so many rookies, and put that money towards signing more veteran players on the free agent market?

Clearly, there is a premium paid to top draft picks, based on the potential that they will blossom into super stars. Owners in pro-sport labor disputes always basically argue that they are too irrational to let market forces operate.